In loan agreements that contain yank-a-bank provisions, a syndicate bank can usually be replaced if it has requested reimbursement for taxes or increased costs of funding, if it has defaulted on its obligation to fund a loan, or if, in connection with an amendment or waiver of the terms of the loan agreement, it has dissented in a vote in which the majority of the lenders approved the amendment.
The borrower is not required to pay a prepayment premium to the departing lender, but before its replacement becomes effective, the departing lender must receive an amount equal to all the outstanding principal of its loan and all accrued interest, fees, costs, expenses, and other amounts payable to it under the loan agreement. The replacement lender must qualify as an eligible assignee under the loan agreement's assignment provisions because the transfer of the departing lender's interest in the loan to the replacement lender is affected by an assignment.
The replacement lender is responsible for paying the principal, accrued interest, and certain fees, while the borrower must pay any other amounts due to the departing lender, such as indemnification amounts or other expense reimbursements.
Typically, for the borrower to be able to take advantage of a yank-a-bank provision, it must find a replacement lender the identity of which must be acceptable to the administrative agent that is ready and able to fund. Jurisdiction United States.
A clause in a loan agreement that gives the borrower the right to replace a single member of the lending syndicate with a new lender in limited circumstances. Ask a question. Maintained Resource Type Glossary.